The SCi's the limit

The two head honchos of the company that have set the financial side of Fleet Street into a frenzy have entered into the lion’s den of an MCV interview without a PR man or corporate communications windshield in spitting distance.

Surely this is the chance to get the real scoop on who’s interested in what; who’s buying who and who that Chinese company may or may not be?

Well, not exactly. Jane Cavanagh has endured so much financial press speculation in her time as CEO of SCi that ‘politely sinking difficult questions’ is surely etched on her CV in granite.

And after experiencing an avalanche of scurrilous conjecture from the rumourmongers of the national press of late, it seems new chief financial officer Phil Rogers has effortlessly picked up this particular ability, too.

Indeed, when MCV slips Rogers a tantalisingly open question on the ‘level of interest’ the firm has seen since the initial announcement, he does an immaculate job of proficiently turning the conversation back to Eidos’ successes.

“When there is this level of interest,” he says, “it confirms we’re doing all the right things – investing in the right areas and building a portfolio and development talent that is truly world class.”

Unsurprisingly, Rogers and Cavanagh are much looser with their tongues when discussing quite what ‘investing in the right areas’ entails – and much of it involves Nintendo’s runaway success.

“We have 30 titles coming out on Wii between now and the end of 2008 which really is some commitment,” explains Cavanagh. “We believe that Wii can keep up this level of success years into the future. At the moment, it’s more about games for females, older people and family-orientated products – which has opened up a whole new world for us and other publishers. But over two to three years, I think we’ll start to see Nintendo making real in-roads in what used to be called the core gamers.”

Cavanagh’s crystal ball has come good before, of course. And the acquisition-hungry mentality that has served the company so well in the past is showing no signs of diminishing.

Rogers says that more studio acquisitions are likely to join recent additions Morpheme, Rockpool and Blue Fish Media over the next 12 months – but only if the price is right.

“We can’t say we’re planning a spending spree to expand our studios – we already have great talent right now,” he explains.

“But we are always ready to expand. And that has to come through a combination of acquisition and organic growth. Studios have to hold a world-class development resource and compelling IP. If the cap fits in those terms, we’re ready to acquire.”

The report that accompanies Eidos’ end-of-year results highlights the potential of the firm’s new Montreal studio, as well as its intention to expand into ‘locations that allow us to keep development costs low’. Which, financial jargon aside, means China, according to Cavanagh.

“As far as Montreal is concerned, we plan to expand on the existing infrastructure,” she says. “We have the option to take more space there as we grow organically. At the moment they’re working on one project, but we can get them up to three or four simultaneous projects with reasonable ease.

“We’re also looking at China. We have people who have gone to start a hub out there, predominantly to increase what we’re doing in terms of outsourcing, and to partner up with the existing studios. Over a period of time we’ll increase our presence through existing partnerships or open up our own studios.”

To the industry novice, the optimism of Cavanagh may look at odds with the pre-tax £30 million loss the company suffered in the 12 months to June 30th.

But, she says, when you take into account the £14.5 million blow the firm took on price protection charges and the potential of its line-up in the coming 12 months, there are plenty of reasons to be cheerful for FY2008.

“That provision was very specific in terms of the timing of the transitional phase between PS2 and next-generation,” she says.

“In past years a provision of ten per cent has been, on average, spot on. This year we had to increase it by an additional ten per cent, but we don’t envisage that recurring.

“There is also every chance that we will make a lot of money on those products through digital distribution in future, which gives us real potential to extend the life of our most classic releases.

“And that’s not to mention the like of Kane & Lynch and the ‘Friends’ series that spawned Pony Friends – which we’re looking to release around 20 titles on.”

And what of the new interest? Has it added to the confidence of a resurgent Eidos? “It’s business as usual here. We’re focusing on building the company organically or by acquisition and if we’re attractive to others, we listen.”

With the ability to acquire when the time is right, a sensible strategy on each next-gen console and a wealth of new IP, Cavanagh’s phone shouldn’t stop ringing. And not just from members of the national press.

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MCV is the leading trade news and community site for all professionals working within the UK and international video games market. It reaches everyone from store manager to CEO, covering the entire industry. MCV is published by NewBay Media, which specialises in entertainment, leisure and technology markets.